Global equities got a shake up this week (overdue?) on concerns about rising bond yields, higher interest rates, slower growth and trade wars. This ushered US equities from their highs and dragged peer indices down with them. However not all UK shares had a tough week. In fact, some of the high beta names – those which move up and down more than the UK Index – fared rather well, while some of the traditional defensives actually struggled.

When I say “fared well”, I mean rallied. Strongly. Even as the UK Index fell 3.5%*. Precious metals miners Fresnillo and Randgold Resources top the UK Index leader board with gains of 12.6% and 9.7%, respectively, thanks to Gold breaking back above $1210, escaping its recent range to trade its best since August, as wider share price declines fuelled fresh demand for the safe haven. Next up were several Retail names, despite the sector still facing travails such as price and internet competition, rising interest rates and consumer uncertainty.

Marks & Spencer +5.3%, B&Q and Screwfix-owner Kingfisher +3.3%, Tesco +2.3% and Next +1.8% are not exactly what I’d classify defensive names amid an equity market correction, exposed to consumer confidence, house prices, interest rates, high street decline and discount competition. However there they sit in the top 10 on the UK Index this week’s, perhaps having benefited, like the aforementioned safe haven Miners, from an element of bargain hunting and value seeking (some decent dividends) whilst other names corrected from (or even further from) recent highs.

Other gainers include telecom giant BT (+3.1%), which extended this week’s breakout and adding to late August momentum, helped by hopes of a split into BT and Openreach. Its 6% dividend yield may have helped too. Anglo American (+1.9%) may not be a pure precious metal miner like those mentioned earlier but it digs out enough rare metals and diamonds for it to outperform peers more exposed to the Copper, Coal, oil etc. Following negative broker comments, Sage (+2.6%) bounced from 3yr lows.

As for the losers, equipment rental company Ashtead (-13.1%) got a drubbing on account of its significant US exposure and a breach of a significant summer trend-line of support. Investment platform Hargreaves Lansdown (-12.9%) lost ground due to its links to volatile equity markets and a disappointing quarterly trading update. Paper and packaging makers Smurfit Kappa (-10.5%), DS Smith (-10.3%) and Mondi (-10.1%) all fell on sector weakness amid concerns about China oversupplying the US market for e-commerce packaging.

Melrose, Rentokil, Croda, LSE and Rolls Royce and Smiths all fell 8-10%. Industrial Melrose likely suffered from recently acquired GKN’s exposure to the US, the same being true of pest-control Rentokil and chemicals Croda. The LSE is at risk of less City trading in the case of bad Brexit and recent IPO disappointments. Rolls Royce fell on worries about stalled aircraft engine orders while Smiths is exposed to global economic growth and continues to acquire.

All week we have been highlighting to clients Breakouts and Breakdowns, Support and Resistance, Ranges and Momentum (positive and negative), helping them identify tradable opportunities. To make sure you are included on our distribution list next week, aware of the latest ideas whether the UK Index falls further or continues to recover, get access to our recently refreshed and award-winning research. Allow us assist you in taking your trading and/or investment decision to the next level. It’d be our pleasure.

Enjoy your weekend

Mike van Dulken, Head of Research, 12 Oct 2018

(*all performance intra-day)